TRAINING ON INFRASTRUCTURE FINANCE IN PUBLIC

PRIVATE PARTNERSHIP PROJECTS

20 July, 2010

Final Report

ORIGINAL

Submitted by:

Cambridge Economic Policy Associates Ltd

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FINAL REPORT

CONTENTS

1. Introduction ................................................................................................................. 3

2. The Course ................................................................................................................... 4

3. The Participants ........................................................................................................... 6

4. Participant Evaluation ................................................................................................. 7

5. Course Evaluation ........................................................................................................ 8

6. Conclusions ................................................................................................................. 10

Annex 1: Participant Attendance ........................................................................................ 11

Annex 2: Ideas for Further Courses .................................................................................... 14

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1. INTRODUCTION

Cambridge Economic Policy Associates (CEPA) was selected to provide a training course on

Infrastructure Finance for the State Bank of Pakistan (SBP), co-funded by the World Bank. The

course was held at the SBP’s Learning and Resource Centre (LRC) at Karachi, Pakistan, From

Monday July 12th to Friday July 16th, 2010.

This final report provides:

• an overview of the final course provided (Section 2);

• a summary of the participants (Section 3);

• the results of two assessments (one of the learning arising from the training and one

relating to the provision and coverage of the course – Sections 4 and 5); and

• some conclusions and next steps (Section 6).

CEPA and the team that provided the course would like to thank the SBP and the participants of

the course for their support, active involvement and feedback. All these things made the course,

in our view, a success. We would also like to thank the staff at the LRC and believe that the

facilities available at the LRC created an environment which made the provision of the course

possible.

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2. THE COURSE

Following an Inception Report a final outline for the five day course was agreed which built on

an earlier proposal provided by the World Bank Institute. Figure 2.1 provides an overview of the

final course outline.

The course was structured around:

• initially developing key concepts relating to Project Finance and PPPs;

• considering the way that core ideas, such as Risk Transfer, are implemented and what

they mean for each of the stakeholders;

• establishing the tools that can be used to evaluate the core issues, especially the Financial

Model; and

• using examples of the tools and concepts to cement the understanding of the concepts.

This is reflected in the build-up of the course through plenary sessions, case studies and

exercises, culminating in a morning long computer based exercise on the final day, evaluating a

proposed PPP project.

Where possible examples from Pakistan and more broadly across South Asia were used to

illustrate issues. However, these needed to be supplemented with broader experience owing to

the lack of detailed case studies available.

In addition, a CD was provided to all participants. This included:

• copies of all the slides used;

• a copy of the financial model used for the final exercise; and

• background papers that covered the issues considered in the course.

The SBP also provided hard copies of all slides and exercise documentation for participants at

the beginning of the course.

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Table 2.1: Course outline

Session Monday Tuesday Wednesday Thursday Friday

1) 8:30 to 9:00 Registration Recap and intro Recap and intro Recap and intro Recap and intro

2) 9:00 to 10:15 Introduction &

welcoming remarks

Plenary 5

Sources of Finance

Plenary 10

Financial Modelling I

Plenary 13

Fiscal risk

management & PPPs

Exercise 2

Risk allocation and

funding (1)

3) 10:15 to 10:45 (T)

4) 10:45 to 12:00 Plenary 1

Project Finance

Plenary 6

PPP project risks I

Plenary 11

Financial Modelling II

Case study 2

Risk allocation and

mitigation in a road

project

Exercise 2

Risk allocation and

funding (2)

5) 12:00 to 13:00 Plenary 2

Public Private

Partnerships

Plenary 7

PPP project risks II

Case study 1

Example of a

financial model for

roads

Plenary 14

Description of the

Concession

Agreement

Exercise 2

Risk allocation and

funding (3)

6) 13:00 to 14:00 (L)

7) 14:00 to 15:00 Plenary 3

Public Sector ‘for &

against’ PPPs

Plenary 8

Project Feasibility

Plenary 12

Weighted Cost of

Capital (WACC)

Plenary 15

Contract Award

methods

Exercise 2

Group report back

on exercise

8) 15:00 to 15:30 (T)

9) 15:30 to 16:30 Plenary 4

Requirements for a

successful PPP

Programme

Plenary 9

Value for Money

Exercise 1

Assessing the

viability of a project

proposal

Evaluation Final summing up

10) 16:30 to 17:00 Wrap-up Wrap-up Wrap-up Wrap-up Wrap-up

Session Monday Tuesday Wednesday Thursday Friday

1) 8:30 to 9:00 Registration Recap and intro Recap and intro Recap and intro Recap and intro

2) 9:00 to 10:15 Introduction &

welcoming remarks

Plenary 5

Sources of Finance

Plenary 10

Financial Modelling I

Plenary 13

Fiscal risk

management & PPPs

Exercise 2

Risk allocation and

funding (1)

3) 10:15 to 10:45 (T)

4) 10:45 to 12:00 Plenary 1

Project Finance

Plenary 6

PPP project risks I

Plenary 11

Financial Modelling II

Case study 2

Risk allocation and

mitigation in a road

project

Exercise 2

Risk allocation and

funding (2)

5) 12:00 to 13:00 Plenary 2

Public Private

Partnerships

Plenary 7

PPP project risks II

Case study 1

Example of a

financial model for

roads

Plenary 14

Description of the

Concession

Agreement

Exercise 2

Risk allocation and

funding (3)

6) 13:00 to 14:00 (L)

7) 14:00 to 15:00 Plenary 3

Public Sector ‘for &

against’ PPPs

Plenary 8

Project Feasibility

Plenary 12

Weighted Cost of

Capital (WACC)

Plenary 15

Contract Award

methods

Exercise 2

Group report back

on exercise

8) 15:00 to 15:30 (T)

9) 15:30 to 16:30 Plenary 4

Requirements for a

successful PPP

Programme

Plenary 9

Value for Money

Exercise 1

Assessing the

viability of a project

proposal

Evaluation Final summing up

10) 16:30 to 17:00 Wrap-up Wrap-up Wrap-up Wrap-up Wrap-up

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3. THE PARTICIPANTS

The SBP made the course available to a range of stakeholders in Pakistan as well as SBP staff,

including:

• Commercial banks;

• Government agencies and Development Finance Institutions; and

• Other companies, potential sponsors etc.

Over 60 participants registered for the course, with over 50 actually attending. Information on

the participants is provided in table 3.1.

Table 3.1: Attendance

Type Booked

No. of people Institutions

SBP 14 1

GoP 5 3

Commercial Banks 37 14

DFIs 7 4

Other 2 2

Total 65 24

Final attendance was actually 57 of the 65 who had booked. As is ever the situation with a long

course, attendance did vary during the week. However, the average number of days attendance

for each participant was 4.3 (for those people who attended at least one day of the course) and

41 participants attended every day of the course.

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4. PARTICIPANT EVALUATION

One issue that CEPA was asked to assess was the impact of the course on attendees. Ideally this

sort of evaluation would be undertaken through a test that is implemented twice, once at the

beginning of a course and once at the end (what the World Bank Institute refers to as a level 2

assessment). Rather than this detailed level 2 assessment a simpler level 1 assessment was

undertaken – this was through a single test towards the end of the course. While this does not

allow the impact of the course to be directly evaluated (through the change in the scores of the

participants) it does allow for an assessment of whether a level of understanding had been

achieved.

Further, we viewed the test as a way of establishing whether there were areas that had been

taught on the course which required clarification or correction rather than testing how well

participants remembered issues – so the test was also undertaken on an open-book basis.

The dispersion of results of the test are shown in the following figure. It should be noted that

the maximum score was 15 (no-one scored this but two people did score 14.5).

Figure 4.1: Dispersion of participant scores

0

2

4

6

8

10

12

Below 8 8 to 10 10 to 12 Above 12

The average mark was 10.66.

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5. COURSE EVALUATION

Apart from evaluating the participants, a questionnaire was circulated to help assess the course in

terms of content, presentations and presenters. Table 5.1 summarises the responses to the

general questions raised in the questionnaire.

Table 5.1: Summary of responses Question Responses Absolute Percentage

Yes No Yes No

Was the course what you expected? 30 23 7 77 23

Were the case studies useful? 30 29 1 97 3

Were the exercises useful? 28 25 3 89 11

Were the slides clear? 30 24 6 80 20

What is clear is that the course met the expectations of the majority of respondents (who were in

turn over half the attendees). For those respondents who did not think expectations were met

the majority focused on issues around practical experience and examples, wanting more hands-

on aspects to the course. This was clearly supported through the significant support for the case

study and exercise aspects of the course, shown through the second and third questions.

While we are clearly aware of the problems that a primarily plenary based course raise, and the

frustration that this can cause, the course was designed to:

• cover a wide range of subjects – hence the need for significant plenary time; and

• be accessible to a large group – the expected numbers were between 50 and 60 – which

makes practical sessions difficult.

Future courses that can either focus on a more specific issue or have a smaller number of

participants could address some of the concerns raised by participants – the computer room at

the LRC has 15 computers and would ideally have only one or two people working on a screen

(depending on the type of course – that would bring the participant numbers down significantly

compared to the numbers at this course). Possible future courses were an issue also raised in the

questionnaire and the responses to this are discussed below.

The final general question related to the slides. While the majority of people found the slides

acceptable there were some general concerns about the font size and amount of information on

the slides. These are issues that can be addressed if future courses are held.

With respect to the speakers, feedback was requested. For the majority of respondents no issues

were raised. A few requested that speakers should speak more slowly.

Many of the respondents provided suggestions for further courses – a comprehensive list is

provided as annex 2. Issues identified by multiple attendees included:

• financial modelling – related to more hands-on development of models (something that

would be possible with the resources available at the LRC;

• power sector issues – including more about IPPs, especially as this is an area where

Pakistan has been particularly active;

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• other sector issues – as per the power sector issue above, each of the sectors have

specific issues and examples that could be investigated;

• Pakistan case studies – learning lessons from relevant case studies can be helpful,

although work would be required to develop the case studies outside of the power sector;

• documentation issues – ranging across more detailed investigations of concession

documents, other legal documents etc; and

• Shariah compliant issues – how infrastructure financing can be made Shariah compliant.

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6. CONCLUSIONS

This report has summarised the results of the course provided by CEPA during July 2010. We

believe that the results show that the course was a success.

Several possible interesting areas for further courses were identified by participants. These are

things that the World Bank, SBP and other relevant agencies in Pakistan should consider. We

would be happy to help develop course outlines and deliver courses where appropriate.

Finally, the support of the SBP and the facilities available at the LRC helped make the course a

success. Again we would like to thank our hosts for all their help and support.

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ANNEX 1: PARTICIPANT ATTENDANCE

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ANNEX 2: IDEAS FOR FURTHER COURSES

Disclosure requirements Legal and regulatory framework for infrastructure financing Shariah compliant modes for infrastructure financing (x2) Contractual frameworks Power sector issues (esp IPPs x3) Pakistan case studies (x2) Financial modelling (x2) Concession agreements Bid evaluation Legal documentation Quantifying risk in the discount factor Sector wise issues (x2) Financial aspects of PPP International case studies Project documentation